EC World REIT (SGX:BWCU) may not be familiar to many – it is a pure-play China specialised and e-commerce logistics REIT with a total of 8 properties in its portfolio, valued at approximately S$1.6 billion as at the end of FY2019 on 31 December 2019.

The REIT published its 2019 annual report on 15 April 2020, and as a unitholder of the REIT, I have gone through it to learn about the latest updates from the management and in this post, I will be sharing with you some of the most important pointers to take note of (especially if you are a unitholder of the REIT):

Letter to Unitholders by Chairman of the Board and Non-Executive Director Zhang Guobiao:

  • Despite global macroeconomic uncertainties and geopolitical tensions, Mr Zhang updated that the REIT still managed to successfully execute their multi-pronged strategies, namely (i) proactive management and enhancement of the REIT’s existing portfolio, (ii) active pursuit of yield accretive acquisitions, and (iii) prudent management of capital and funding base to enhance value for unitholders.
  • Some of the highlights include, (i) in May 2019, the REIT entered into New Master Lease Agreements from Chongxian Port Investment, Stage 1 Properties of Bei Gang Logistics, and Fu Heng Warehouse, and this significantly extended the REIT’s lease expiry profile, as well as enhanced predictability and income stability, (ii) in August 2019, the REIT acquired Fuzhou E-commerce, a 214,284 sq m integrated e-commerce logistics facility for RMB1,112.5mil, a 7.5% discount to the average independent valuations (with Master Lease Agreements) from the sponsor, and (iii) the REIT also refinanced loans which were undertaken at IPO, and this provided the REIT with funding certainty for future growth.
  • In light of the Covid-19 situation in China since the start of 2020, Mr Zhang shared that as EC World REIT is in the logistics sector with tenants’ businesses largely in e-commerce, port logistics, and in the specialised logistics sector specialising in domestic businesses and trade, its assets and underlying operations are less exposed compared to businesses with operations that rely largely on human traffic.
  • However, he added that the restriction of people in many countries in a bid to contain the virus has impacted economies worldwide, disrupting supply chains and production processes.
  • Finally, in FY2019, the REIT had retained about 1.3% of the amount available for distribution for general working capital purposes and unforeseen contingencies.

Key Financial Highlights of EC World REIT (FY2018 vs. FY2019):

Financial Performance:

FY2018FY2019% Variance
Gross Revenue
(S$’mil)
$96.2m$99.1m+3.0%
Net Property
Income (S$’mil)
$87.3m$89.7m+2.7%
Distribution to
Unitholders (S$’mil)
$48.8m$48.2m-2.1%
Distribution Per
Unit (S$’cents)
6.179
cents
6.047
cents
-2.1%

The increase in the REIT’s gross revenue and net property income were due to embedded rental escalations and income contribution from the newly acquired Fuzhou E-commerce in August 2019.

The 2.1% drop in the REIT’s distribution to unitholders was largely due to foreign exchange differences, technical timing difference between the loan drawdown and the completion of the Fuzhou E-commerce in 3Q FY2019, as well as the retention of 5% of distribution income in 4Q FY2019.

Key Financial Indicators:

FY2018FY2019
Gross Borrowings/
Total Assets
(%)
31.5%38.7%
Interest Cover
Ratio (times)
4.4x3.7x
Weighted Average
Debt Maturity
(years)
0.5 years2.6 years
Annualised All-In
Interest Rate (%)
4.3%4.5%

Portfolio Occupancy Profile as at 31 December 2019:

As at 31 December 2019, an overall portfolio occupancy of 99.97% was achieved. Also, the proportion of e-commerce logistics assets accounts for approximately 50.0% of the REIT’s total portfolio.

In terms of its weighted average lease expiry profile (in percentage terms) by net lettable area, 0.6% of the lease will expire in FY2019, 26.8% in FY2020, 13.7% in FY2021, 1.6% in FY2022, 0.7% in FY2023, and the remaining 56.6% in FY2024 and beyond.

Finally, the following is a breakdown of tenancy according to trade sector, weighted on gross revenue contribution in FY2019:

  • 48.6% – E-commerce Services
  • 35.8% – Delivery, Logistics, and Distribution
  • 13.2% – Industrial
  • 1.8% – Trading
  • 0.6% – Others (including Telecommunication Sectors, Conglomerates, and Human Resource Sector)

Date of Annual General Meeting (AGM):

In a separate note provided by the REIT (you can read the note in full here), I understand that the tentative date for the AGM will be on Wednesday, 13 May 2020, subject to changes.

As a unitholder, I will be interested to attend the AGM if circumstances permit. I will provide an update on the confirmed date and time of the AGM as and when I have them via The Singaporean Investor’s Telegram broadcast group (you can join the group here), as well as via InvestingNote (you can follow my profile here.)

Download Your Copy of EC World REIT’s Annual Report 2019:

You can download your digital copy of EC World REIT’s latest annual report for FY2019 here.

Disclaimer: At the time of writing, I am a unitholder of EC World REIT.

 

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